TORONTO - An Ottawa-based public watchdog group warns some Ontario consumers could be caught in a never-ending cycle of borrowing from payday loan companies.
Starting today, Ontario will allow payday loan firms to charge a maximum of $21 for every $100 borrowed.
John Lawford of the Public Interest Advocacy Centre says that's an "astronomically high" rate that works out to about 700 per cent annually.
Lawford predicts some people will end up taking eight or ten such payday loans a year as they continually scramble to pay off the high interest rates.
He says most of the $2 billion a year borrowed from Canadian payday loan companies is done so by repeat customers who can't get ahead of their debts.
However, the Canadian Payday Loan Association says the new maximum rate will help protect consumers and get unscrupulous players out of the business.
Manitoba allows companies to charge a maximum of $17 per $100 borrowed, BC and Saskatchewan allow charges up to $23 while Nova Scotia's maximum is $31 for every $100 borrowed.
